What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-05 compared with 2025-05-06 · 117 added, 67 removed, 193 unchanged (49% of the section changed)

11 unchanged sentences

our expectations regarding certain claims, legal proceedings, settlements or resolutions;

our expectations regarding our acquisition of the citizenM brand and the addition of the citizenM hotels to our system;

our expectations regarding additional payments to citizenM Holding BV and certain of its affiliates;

and other statements that are preceded by, followed by, or include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “foresees,” or similar expressions;

and similar statements concerning anticipated future events and expectations that are not historical facts.

We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including failure to satisfy the conditions to the consummation of the citizenM transaction;

uncertainty resulting from economic, political or other global, national, and regional conditions and events, including related to tariffs, trade, travel and other policies;

We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including uncertainty resulting from economic, political or other global, national, and regional conditions and events, including related to tariffs, trade, travel and other policies;

the risks and uncertainties we describe in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (“2024 Form 10-K”);

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Under our asset-light business model, we typically manage or franchise hotels and other lodging offerings, rather than own them.

Terms of our management agreements vary, but we earn a management fee that is typically composed of a base management fee, which is a percentage of the revenues of the hotel, and an incentive management fee, which is based on the profits of the hotel.

Terms of our management agreements vary, but we earn a management fee that is typically composed of a base management fee, which is a percentage of the revenues of the hotel, and an incentive

management fee, which is based on the profits of the hotel.

In many cases (particularly in our U.S.

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(1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption.

Our comparable properties also exclude MGM Collection with Marriott Bonvoy, Design Hotels, The Ritz-Carlton Yacht Collection, and timeshare properties.

Our comparable properties also exclude MGM Collection with Marriott Bonvoy, Design Hotels, The Ritz-Carlton Yacht Collection, residences, and timeshare properties.

Business Trends

We saw solid global RevPAR growth during the 2025 first quarter compared to the same period in 2024.

For the 2025 first quarter, worldwide RevPAR increased 4.1 percent, reflecting ADR growth of 2.9 percent and occupancy improvement of 0.7 percentage points.

The increase in RevPAR in the 2025 first quarter was primarily driven by year-over-year demand growth in nearly all of our regions.

& Canada, RevPAR increased 3.3 percent in the 2025 first quarter, led by strong demand from our group customer segment.

In our International regions, RevPAR grew 5.9 percent in the 2025 first quarter, reflecting higher demand in APEC with RevPAR growth of 10.9 percent, EMEA with RevPAR growth of 5.9 percent, and CALA with RevPAR growth of 7.2 percent.

In Greater China, RevPAR decreased 1.6 percent in the 2025 first quarter driven by a decrease in ADR of 2.7 percent, reflecting lower domestic demand as a result of macro-economic conditions.

In the U.S., we saw some softening of demand in certain customer segments in March, primarily in government business.

We continue to monitor macro-economic conditions and impact on lodging demand.

In the 2025 second quarter, worldwide RevPAR increased 1.5 percent, driven by ADR growth of 1.9 percent.

In the 2025 first half, worldwide RevPAR increased 2.8 percent, driven by ADR growth of 2.4 percent.

& Canada, RevPAR was unchanged in the 2025 second quarter and increased 1.6 percent in the 2025 first half, compared to the same periods in the prior year, reflecting strong demand at our luxury hotels, offset by weaker demand at our select service hotels largely driven by softness in government travel and weaker business transient demand.

In our International regions, RevPAR grew 5.3 percent in the 2025 second quarter and 5.7 percent in the 2025 first half, compared to the same periods in the prior year, reflecting higher demand in APEC, EMEA, and CALA.

In Greater China, RevPAR decreased 0.5 percent in the 2025 second quarter and 1.0 percent in the 2025 first half, reflecting soft macro-economic conditions and lower ADR.

Starwood Data Security Incident

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System Growth and Pipeline

At the end of the 2025 first quarter, our system had 9,463 properties (1,718,542 rooms), compared to 9,361 properties (1,706,331 rooms) at year-end 2024 and 8,861 properties (1,643,172 rooms) at the end of the 2024 first quarter.

In the 2025 first quarter, we added roughly 12,200 net rooms.

At the end of the 2025 first quarter, we had approximately 3,800 properties and over 587,000 rooms in our development pipeline, which included over 27,000 rooms approved for development but not yet under signed

Our development pipeline included nearly 244,000 rooms, or 42 percent, that were under construction or in the process of converting to our system at the end of the 2025 first quarter.

At the end of the 2025 second quarter, our system had 9,601 properties (1,735,819 rooms), compared to 9,361 properties (1,706,331 rooms) at year-end 2024 and 8,969 properties (1,658,659 rooms) at the end of the 2024 second quarter.

In the 2025 first half, we added roughly 29,500 net rooms.

At the end of the 2025 second quarter, we had approximately 3,900 properties and over 590,000 rooms in our development pipeline, which included over 37,000 rooms approved for development but not yet under signed contracts.

Our development pipeline included over 238,000 rooms, or 40 percent, that were under construction or in the process of converting to our system at the end of the 2025 second quarter.

Over half of the rooms in our quarter-end development pipeline are located outside U.S.

We currently expect full year 2025 net rooms growth to approach 5 percent, including the rooms associated with the citizenM brand acquisition discussed in Note 2.

We currently expect full year 2025 net rooms growth to approach 5 percent, including the rooms associated with the citizenM brand acquisition discussed in Note 2, which are not reflected in the development pipeline discussed above.

Properties and Rooms

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Properties Rooms

March 31, 2025 March 31, 2024 vs.

March 31, 2024 March 31, 2025 March 31, 2024 vs.

March 31, 2024

June 30, 2025 June 30, 2024 vs.

June 30, 2024 June 30, 2025 June 30, 2024 vs.

June 30, 2024

1,972 1,980 (8) — % 566,838 568,501 (1,663) — %

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Lodging Statistics

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties.

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties.

Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

Three Months Ended March 31, 2025 and Change vs.

Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 and Change vs.

Three Months Ended June 30, 2024

RevPAR Occupancy Average Daily Rate

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$ 188.25 1.9 %

Six Months Ended June 30, 2025 and Change vs.

Six Months Ended June 30, 2024

RevPAR Occupancy Average Daily Rate

2024 2025 vs.

Comparable Company-Operated Properties

& Canada $ 189.76 3.3 % 70.2 % 0.4 % pts.

$ 270.29 2.7 %

Europe $ 208.40 4.2 % 69.7 % 2.6 % pts.

$ 299.19 0.2 %

Middle East & Africa $ 141.06 8.6 % 69.5 % 2.3 % pts.

$ 203.09 5.0 %

Greater China $ 79.55 (1.2) % 66.6 % 0.6 % pts.

$ 119.50 (2.1) %

Asia Pacific excluding China $ 127.75 9.1 % 70.4 % 1.3 % pts.

$ 181.54 7.1 %

Caribbean & Latin America $ 215.47 9.3 % 67.8 % 0.2 % pts.

$ 317.70 9.0 %

International - All (1)

$ 124.32 5.5 % 68.5 % 1.2 % pts.

$ 181.48 3.5 %

Worldwide (2)

$ 151.61 4.3 % 69.2 % 0.9 % pts.

$ 219.04 3.0 %

Comparable Systemwide Properties

& Canada $ 133.45 1.6 % 69.9 % (0.2) % pts.

$ 190.83 1.9 %

Europe $ 141.66 5.0 % 68.1 % 2.4 % pts.

$ 208.14 1.3 %

Middle East & Africa $ 129.96 9.3 % 68.6 % 2.2 % pts.

$ 189.40 5.8 %

Greater China $ 73.19 (1.0) % 65.1 % 0.5 % pts.

$ 112.36 (1.7) %

Asia Pacific excluding China $ 129.68 9.8 % 71.0 % 1.6 % pts.

$ 182.57 7.3 %

Caribbean & Latin America $ 136.36 5.4 % 63.6 % (0.8) % pts.

$ 214.38 6.8 %

International - All (1)

$ 117.35 5.7 % 67.3 % 1.2 % pts.

$ 174.37 3.8 %

Worldwide (2)

$ 128.08 2.8 % 69.1 % 0.3 % pts.

$ 185.47 2.4 %

(1) Includes Europe, Middle East & Africa, Greater China, Asia Pacific excluding China, and Caribbean & Latin America.

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CONSOLIDATED RESULTS

The discussion below presents an analysis of our consolidated results of operations for the 2025 first quarter compared to the 2024 first quarter.

The discussion below presents an analysis of our consolidated results of operations for the 2025 second quarter compared to the 2024 second quarter and for the 2025 first half compared to the 2024 first half.

Also see the “Business Trends” section above for further discussion.

Three Months Ended

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Base management fees $ 340 $ 330 $ 10 3 % $ 665 $ 643 $ 22 3 %

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Net fee revenues $ 1,371 $ 1,316 $ 55 4 % $ 2,618 $ 2,503 $ 115 5 %

The increase in base management fees in the 2025 first quarter primarily reflected higher RevPAR.

The increase in franchise fees in the 2025 first quarter primarily reflected higher RevPAR as well as unit growth ($18 million).

The increase in base management fees in the 2025 second quarter and 2025 first half primarily reflected higher RevPAR and rooms growth ($7 million and $12 million for the second quarter and first half, respectively).

The increase in franchise fees in the 2025 second quarter and 2025 first half primarily reflected rooms growth ($25 million and $43 million, respectively).

Additionally, the increase in franchise fees in the 2025 first half reflected higher RevPAR and co-branded credit card fees ($20 million).

Owned, Leased, and Other

Three Months Ended

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Owned, leased, and other revenue $ 441 $ 395 $ 46 12 % $ 802 $ 752 $ 50 7 %

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Cost Reimbursements

Three Months Ended

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Cost reimbursement revenue $ 4,932 $ 4,728 $ 204 4 % $ 9,587 $ 9,161 $ 426 5 %

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Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively.

Cost reimbursements, net remained relatively unchanged in the 2025 first quarter as higher revenues were offset by higher expenses for many of our centralized programs and services.

The decrease in cost reimbursements, net in the 2025 second quarter and 2025 first half primarily reflected higher expenses, net of revenues for many of our centralized programs and services and higher expenses related to our insurance program, partially offset by higher Loyalty Program revenues.

Other Operating Expenses

Three Months Ended

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Depreciation, amortization, and other $ 53 $ 47 $ 6 13 % $ 104 $ 92 $ 12 13 %

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8 8 — — % 9 16 (7) (44) %

General, administrative, and other expenses decreased in the 2025 first quarter primarily due to lower compensation costs.

General, administrative, and other expenses decreased in the 2025 second quarter and 2025 first half primarily due to lower compensation costs.

Non-Operating Income (Expense)

Three Months Ended

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

(Losses) gains and other income, net $ (2) $ 4 $ (6) (150) %

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Gains and other income, net $ 5 $ 4 $ 1 25 % $ 3 $ 8 $ (5) (63) %

Interest expense (203) (173) (30) (17) % (395) (336) (59) (18) %

Interest income 12 9 3 33 % 21 19 2 11 %

Equity in earnings 1 — 1 nm*

* Percentage change is not meaningful.

Interest expense increased in the 2025 first quarter primarily due to higher debt balances driven by Senior Notes issuances, net of maturities ($37 million).

Three Months Ended

Equity in earnings 4 5 (1) (20) % 5 5 — — %

Interest expense increased in the 2025 second quarter and 2025 first half primarily due to higher debt balances driven by Senior Notes issuances, net of maturities ($36 million and $67 million, respectively).

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Provision for income taxes $ (291) $ (268) $ (23) (9) % $ (390) $ (431) $ 41 10 %

Provision for income taxes decreased in the 2025 first quarter primarily due to the current year release of tax reserves ($86 million).

Provision for income taxes increased in the 2025 second quarter primarily due to a shift in earnings to jurisdictions with higher tax rates ($21 million).

Provision for income taxes decreased in the 2025 first half primarily due to the current year release of tax reserves ($91 million), partially offset by a shift in earnings to jurisdictions with higher tax rates ($36 million).

BUSINESS SEGMENTS

The following discussion presents an analysis of the operating results of our reportable business segments for the 2025 first quarter compared to the 2024 first quarter.

The following discussion presents an analysis of the operating results of our reportable business segments for the 2025 second quarter compared to the 2024 second quarter and for the 2025 first half compared to the 2024 first half.

Also see the “Business Trends” section above for further discussion.

Three Months Ended

Three Months Ended Six Months Ended

($ in millions)

March 31, 2025 March 31, 2024 Change 2025 vs.

June 30, 2025 June 30, 2024 Change 2025 vs.

2024 June 30, 2025 June 30, 2024 Change 2025 vs.

Segment net fee revenues

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Properties Rooms

March 31, 2025 March 31, 2024 vs.

March 31, 2024 March 31, 2025 March 31, 2024 vs.

March 31, 2024

June 30, 2025 June 30, 2024 vs.

June 30, 2024 June 30, 2025 June 30, 2024 vs.

June 30, 2024

6,350 6,054 296 5 % 1,056,775 1,025,351 31,424 3 %

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APEC 649 590 59 10 % 145,904 134,636 11,268 8 %

In the 2025 first quarter, segment profits grew in U.S.

& Canada and APEC, compared to the same period in 2024, primarily driven by higher net fee revenues as a result of higher RevPAR and unit growth (see the Lodging Statistics and Properties and Rooms tables above for more information).

In the 2025 first half, segment net fee revenues grew in U.S.

& Canada, EMEA, and APEC, compared to the same period in 2024, primarily driven by higher RevPAR and rooms growth (see the Lodging Statistics and Properties and Rooms tables above for more information).

LIQUIDITY AND CAPITAL RESOURCES

Our long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital.

At the end of the 2025 first quarter, including the effect of interest rate swaps, our long-term debt had a weighted average interest rate of 4.6 percent, a weighted average maturity of approximately 5.8 years, and a ratio of fixed-rate to total long-term debt of 0.9 to 1.0.

At the end of the 2025 second quarter, including the effect of interest rate swaps, our long-term debt had a weighted average interest rate of 4.5 percent, a weighted average maturity of approximately 5.6 years, and a ratio of fixed-rate to total long-term debt of 0.8 to 1.0.

Sources of Liquidity

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Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios.

We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We currently satisfy the covenants in our Credit Facility and

public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs.

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Sources and Uses of Cash

Cash, cash equivalents, and restricted cash totaled $546 million at March 31, 2025, an increase of $121 million from year-end 2024, primarily due to long-term debt issuances, net of repayments ($1,608 million) and net cash provided by operating activities ($647 million), partially offset by net commercial paper repayments ($1,002 million), share repurchases ($751 million), dividends paid ($174 million), capital and technology expenditures ($135 million), and financing outflows for employee stock-based compensation withholding taxes ($109 million).

Our ratio of current assets to current liabilities was 0.5 to 1.0 at the end of the 2025 first quarter.

Cash, cash equivalents, and restricted cash totaled $692 million at June 30, 2025, an increase of $267 million from year-end 2024, primarily due to net cash provided by operating activities ($1,290 million), long-term debt issuances, net of repayments ($1,006 million), and net commercial paper issuances ($179 million), partially offset by share repurchases ($1,500 million), dividends paid ($357 million), capital and technology expenditures ($290 million), and financing outflows for employee stock-based compensation withholding taxes ($110 million).

Our ratio of current assets to current liabilities was 0.5 to 1.0 at the end of the 2025 second quarter.

We have significant borrowing capacity under our Credit Facility should we need additional working capital.

Capital Expenditures and Other Investments

We made capital and technology expenditures of $135 million in the 2025 first quarter and $109 million in the 2024 first quarter.

We made capital and technology expenditures of $290 million in the 2025 first half and $234 million in the 2024 first half.

We expect capital expenditures and other investments will total approximately $1,355 million to $1,455 million for the 2025 full year, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities.

This estimate includes $355 million of investment spending related to the citizenM brand acquisition discussed in Note 2, which we expect to close later in 2025, but excludes any

additional potential property or brand acquisitions, which we cannot forecast with sufficient accuracy and which may be significant.

This estimate includes $355 million of investment spending related to the citizenM brand acquisition discussed in Note 2, but excludes any additional potential property or brand acquisitions, which we cannot forecast with sufficient accuracy and which may be significant.

Our anticipated capital and technology expenditures include higher than typical spending on our worldwide technology systems transformation, the overwhelming portion of which we expect to be reimbursed over time, and renovations of hotels in our owned and leased portfolio.

Share Repurchases and Dividends

We repurchased 2.8 million shares of our common stock for $0.8 billion in the 2025 first quarter.

Year-to-date through April 29, 2025, we repurchased 3.9 million shares for $1.0 billion.

We repurchased 2.8 million shares of our common stock for $0.7 billion in the 2025 second quarter.

Year-to-date through July 30, 2025, we repurchased 6.4 million shares for $1.7 billion.

For additional information, see “Issuer Purchases of Equity Securities” in Part II, Item 2.

On February 13, 2025, our Board of Directors declared a quarterly cash dividend of $0.63 per share, which was paid on March 31, 2025 to stockholders of record on February 27, 2025.

Our Board of Directors declared the following quarterly cash dividends in 2025 to date:

(1) $0.63 per share declared on February 13, 2025 and paid on March 31, 2025 to stockholders of record on February 27, 2025;

and (2) $0.67 per share declared on May 9, 2025 and paid on June 30, 2025 to stockholders of record on May 23, 2025.

We expect to continue to return cash to stockholders through a combination of share repurchases and cash dividends.

Material Cash Requirements

As of the end of the 2025 first quarter, other than with respect to our agreement to purchase the citizenM brand discussed in Note 2, there have been no material changes to our cash requirements as disclosed in our 2024 Form 10-K.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Form 10-K for more information about our cash requirements.

As of the end of the 2025 second quarter, other than with respect to our purchase of the citizenM brand discussed in Note 2, there have been no material changes to our cash requirements as disclosed in our 2024 Form 10-K.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of

Operations,” of our 2024 Form 10-K for more information about our cash requirements.

Also, see Note 7 for information on our long-term debt.

At March 31, 2025, projected Deemed Repatriation Transition Tax payments under the 2017 Tax Cuts and Jobs Act totaled $135 million, which was paid in April 2025.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis